Manolete Partners Plc v Hastings Borough Council

These Part 8 Proceedings concern the entitlement of the Claimant to make a claim against the Defendant (“the Council”) under s.106 of the Building Act 1984 (“the 1984 Act”) for compensation as a result of the Council exercising its powers to prevent access to Hastings Pier (“the Pier”) under s.78 of the 1984 Act.

The Claimant brings these proceedings as the beneficiary of a legal assignment of a claim under s. 106 of the 1984 Act by Stylus Sports Limited (in liquidation) (“Stylus”) against the Council.

Stylus was the tenant and operator of a bingo hall and amusement arcade on part of the Pier. Originally Stylus was the tenant of Hastings Pier Company Limited until that company entered into creditors’ voluntary liquidation in 1999. Ravenclaw Investments Incorporated (“Ravenclaw”) then became the freeholder of the Pier.

By two leases dated 14 August 2001 and 10 October 2001 made between Stylus and Ravenclaw, Stylus took leases of parts of the pier on which it earned out its business as the operator of a bingo hall and an amusement arcade, respectively. The relevant parts were described as Units C2 and C15. By Schedule 1 to both leases, the premises included the ceilings and floors and floor finishes but not the structural members in the roof or supporting the floors of the Units. Under the Schedules to the Leases, Stylus had rights to pass over the common parts of the Pier.

Ravenclaw had repairing obligations in terms of “repairing maintaining and when requisite modifying or renewing and rebuilding the structure (including the support structure roof structural and load bearing walls structural columns beams slabs and floors and the exterior” of the Pier in respect of which any such matters did not fall to be performed by Stylus or any other tenants. It was common ground that neither Stylus nor any other tenants had relevant repairing obligations.

In about 2004 Stylus became concerned about the structural integrity of the Pier and commissioned a full structural engineering survey of the Pier by Hamill Davies Limited who produced a report in September 2004. That report was provided to Ravenclaw by Stylus in an attempt to make Ravenclaw carry out the repairing obligations under the Leases. In January 2005 that report was provided to the Council in an effort to persuade the Council to act to require Ravenclaw to carry out the required repairs and maintenance.

Later, on 16 June 2006 the Council gave notice by letter to the Pier tenants that they were exercising their powers under Section 78 of the 1984 Act to close the Pier from the main entrance building onwards, including the Bingo Hall and Amusement Arcade, from 4:00pm on that date.

In a statement attached to their letter the Council stated that they had had concerns about the Pier and had been talking to the owner of the Pier for some time. In May 2006 they said they had served notice on the owner of the Pier requiring them to undertake a survey of the Pier structure after pieces of metal were found to have fallen from the underside of the Pier. The Council noted that three major events were booked to take place in the Pier ballroom in July and August and said that they instructed consulting engineers, Giffords, to look at an area of concern under the main covered walkway around the main facade entrance.

They said that this inspection was carried out on 25 June 2006 and established that at least five trusses had failed and the Council had been advised that it was unsafe to allow large numbers of people onto the Pier. As the area provided the only method of access onto and off the Pier, they said that any emergency requiring evacuation would mean crowds of people walking over the unsafe area. The Council therefore said that they had no option but to close much of the Pier immediately.

Barriers were put up at the main entrance into the Pier building preventing public access to the parts of the Pier where Units C2 and C15 were located.

The Council applied to Hastings Magistrates’ Court and on 12 September that court made an order under s.77 of the 1984 Act ordering Ravenclaw, with immediate effect, to prohibit public access to the relevant part of the Pier until the court was satisfied that any necessary works had been executed or withdrew or modified the restriction.

Stylus instructed solicitors, Gaby Hardwicke, who wrote to the Council on 8 November 2006 seeking compensation for loss of profit and diminution in the value of Stylus’ business from 16 June to 12 September 2006 under s.106 of the 1984 Act. A Notice of Arbitration was given on 15 December 2006.

Stylus went into liquidation and by an agreement dated 3 January 2012 the Liquidator assigned all claims to the Claimant. These proceedings were commenced on 19 April 2012, supported by the witness statement of Paul Maynard, a partner in Gaby Hardwicke, dated 18 April 2012. The Council served an Amended Defence and Mr Maynard served a second witness statement on 22 May 2012. Directions were then given leading to the hearing of the Part 8 Claim.

The Council essentially raised the following defences to the claim under s. 106 of the 1984 Act. The Council refer, as I do below, to the Claimant as encompassing both Stylus and the Claimant itself:

In its submissions the Council extended the duties which it relied upon from the Occupiers Liability Act 1957 to include also the Health and Safety at Work etc Act 1974.

I shall now deal with each of these defences in turn.

This aspect, whilst not abandoned, did not form a main part of the Council’s submissions. In cases where s.106 of the 1984 Act applies, I do not consider that the Council can avoid liability to pay compensation by relying on the fact that they have made an application to the Magistrates’ Court under s.77 of the 1984 Act. Whilst the Council may have sought the court order to replace the Council’s use of its statutory powers under s.78 of the 1984 Act, unless and until the Magistrates’ Court makes an order under s.77, it is the exercise of the Council’s powers under s.78 which are the reason for there being no public access to the Pier. The application to the court does not change the nature of the action taken by the Council and until that court makes an order, it is the Council’s exercise of their powers under s.78 which has effect. At the point when the court makes an order it is then that order which is effective, not the action by the Council under s.78.

It would have been open for the statute to make some saving provision in s. 106 of the 1984 Act in relation to any order made subsequently by the Magistrates Court under s.77 of the 1984 Act. That was not done and cannot be done by means of construing the statute to include a provision which is not there. Instead, it is clear that, where appropriate, the statute does deal with the relationship between ss.77 and 78. In particular, it relates the Council’s ability to recover expenses under s.78 in the context of an application under s.77: see ss.78(4)(b) and 78(5). That shows that the s.78 power is one to be used, as the title to the section states, where emergency measures are necessary and not where the Council “might reasonably have proceeded’ under s.77.

It is common ground that the Council must do something which, absent the power given to it under s.78 of the 1984 Act, would amount to a good cause of action which would be actionable by the Claimant for the damage suffered. Mr Samuel Townend who appeared for the Claimant submitted, however, that it is not necessary for the Claimant to make out an independent cause of action in tort and that there was, in any event, a cause of action. Mr Steven Gasztowicz QC, who appeared for the Council with Miss Clare Parry, submitted that there was no cause of action as the ingredients of any cause of action in tort were not made out.

Section 106 provides as follows:

“106 Compensation for damage

(1)

A local authority shall make full compensation to a person who has sustained damage by reason of the exercise by the authority, in relation to a matter as to which he has not himself been in default, of any of their powers under this Act.

(2)

...any dispute arising under this section as to the fact of damage, or as to the amount of compensation, shall be determined by arbitration."

That section requires a person to have “suffered damage” by reason of the exercise by the Council of their powers under, in particular, s.78. That then gives rise to the cause of action which is necessary to give an entitlement to compensation. In this case, the Council put a barrier across the access to the Pier and closed the Pier to the public. The Council therefore interfered with the right of way which had been given to the Claimant under the Leases. Whether the Council acted reasonably in doing so or whether the Council acted under statutory authority cannot form defences to the Claimant’s right to compensation under s.106. Otherwise, the fact that the Council was properly exercising its powers under s.78 would always form a defence to any claim under s. 106 which cannot have been intended. The only limitation on the entitlement to compensation is that the person claiming must not have been “in default”.

This position is supported by the decision of Parker J in Andreas Leonidis v Thames Water Authority (1979) 11 BLR 16 where he considered a similar provision in s.278 of the Public Health Act 1936 and a submission that so long as a local authority in exercising its powers under that provision did not create an obstruction greater in extent or for longer than was reasonably necessary for the proper carrying out of their duties, no claim would lie. Rejecting that submission, Parker J said at 27:

“This contention is in my judgment untenable. Harper v Hayden was not a decision which, despite what was said in it about the decision in Lingke’s case, decides anything more than that where an owner of premises adjoining a highway is conducting building works and, for the protection of the public, erects a hoarding which obstructs the highway for no longer than reasonably necessary, he commits no wrong. This is in accord with both Herrins and Lingke. To extend this to obstructions by local and other authorities in the exercise of statutory powers would be to deprive section 278 of all content.

It would enable a Water Authority to close completely a street of shops for a year or more if it was reasonably necessary thus depriving shopkeepers of their livelihood for a year, and yet say that there was no right to compensation. A construction on the section leading to such a result would be to attribute to Parliament an intention which amounts almost to confiscation without compensation. I can attribute no such intention.

Moreover, such a construction would be against the ordinary meaning of the words ‘common sense’ and ‘authority’. ”

The facts of Lingke v Christchurch Corporation [1912] KB 595 are instructive. There the relevant similar statutory provisions were in s.308 of the Public Health Act 1875. The Court of Appeal held that ordinary access to a shop had been interfered with by a statutory body carrying out drainage works. Vaughan Williams LJ said at 600 “if this had been done by a private individual she would have had a cause of action.” Fletcher Moulton LJ said the same at 609, as did Buckley LJ at 611. Equally in Leonidis access to a motor repair business was interfered with by work to reconstruct a sewer. Whilst access was still possible it required a long detour and there was no physical interference with the entrance to the premises. Parker J held that if a private individual had interfered with access as the statutory authority had done then there would have been a good cause of action for the loss suffered by the business.

As the editors of Building Law Reports comment in reporting Leonidis, the purpose of the statutory remedy is to provide redress where it would otherwise not be available because of the defence of ‘statutory authority’ and on the basis of a test of ‘unreasonableness’ as a necessary ingredient of nuisance on the highway.

The reliance of Mr Gasztowicz QC on the absence of a cause of action because, for instance, the tort of private nuisance requires a defendant to have acted unreasonably but this is not the case in relation to the Council’s action here, is therefore to take matters into account which are not relevant to the question of whether a private individual interfering with access would give rise to a good cause of action. The same applies to the defence of necessity, referred to in Clerk & Lindsell on Torts (20th Edition) at para 3-30, which is also relied on by Mr Gasztowicz QC.

A cause of action in private or public nuisance or interference with the right of access to premises adjoining a highway would arise where a person is prevented from being able to access premises. This case, like the cases of Lingke or Leonidis, is one where there was interference with access to premises adjoining the highway. As Mr Townend points out, in Lingke and Leonidis the interference with access from the public highway did not prevent all access to the premises by visitors, as it did in this case. In the present case access was prevented both by the notice dated 16 June 2006 and by barriers being put up.

In my judgment, this case is similar to Lingke and Leonidis and is a case where if a private individual had interfered with access, as the Council did, then there would have been a good cause of action for loss suffered.

The Council contends that the Claimant was “in default” and therefore s.106 does not apply. Section 106 requires the Council to make full compensation to a person who has sustained damage “in relation to a matter as to which he has not himself been in default” by reason of the exercise by the Council of their powers under the Act, including s.78.

Whilst he did not contend that the Claimant was in breach of any provisions of the Act itself, Mr Gasztowicz QC submitted that the Claimant was in default either under the Occupiers Liability Act 1957 (“the OLA”) or, as the submissions were expanded, under the Health and Safety at Work etc Act 1974 (“the HSWA”).

He submitted that under s.2 of the OLA the Claimant as occupier of Units C2 and C15 owed a duty to all visitors “to see that the visitor will be reasonably safe in using the premises for which he is invited or permitted by the occupier to be there.” He said that the Claimant was in breach of that obligation in inviting visitors onto the Pier, given its dangerous state, both as established by the evidence and also as shown by the need for the

He submitted that the Claimant could not avoid this conclusion by saying that it could not have done more to try and get the parties, Ravenclaw and the Council, who could do anything about the structure of the Pier, to take action. He said that, if the Claimant could not ensure that visitors were reasonably safe, it should have stopped inviting visitors. Mr Gasztowicz QC submitted that the mere fact that it was Ravenclaw who had the repairing covenant, did not prevent the Claimant from carrying out the work.

He referred to the Court of Appeal decision in Granada Theatres Ltd v Freehold Investment (Levtonstone) Ltd [1959] Ch 592 at 608 where Jenkins LJ cited propositions of law, including:

“(4)

In the event of the landlord failing to do the requisite repairs within a reasonable time after notice, the tenant is entitled to sue him in damages without first incurring expense by doing the repairs himself (Hewitt v. Rowlands (1924) 131 L.T. 757).

(5)

The covenant is clearly not specifically enforceable, but I apprehend that, in the event of the landlord failing to do the repairs in a reasonable time, the tenant can, at his option, do the requisite repairs himself and claim the proper cost of so doing as damages flowing from the breach. ”

In relation to the HSWA Mr Gasztowicz QC submitted that the Claimant also owed duties under ss.2(l) and 3 which would give rise to criminal offences under s.33. Under s.2(1), it is provided that: “It shall be the duty of every employer to ensure, so far as is reasonably practicable, the health, safety and welfare at work of all his employees”. Under s. 3 it is provided that “It shall be the duty of every employer to conduct his undertaking in such a way as to ensure, so far as is reasonably practicable, that persons not in his employment who may be affected thereby are not thereby exposed to risks to their health or safety." Section 33(1 )(a) provides that it is an offence for a person “to fail to discharge a duty to which he is subject by virtue of sections 2 to 7.”

He submitted that, like the OLA, the Claimant would be in breach of the provisions of ss.2(l) and 3 of HSWA if it allowed its employees or persons not in its employment to be in Units C2 or C15 on the dangerous Pier. He referred to the wording of s. 106 of the Act which only provided the Claimant with a right to compensation “in relation to a matter as to which he has not himself been in default." He submitted that the Claimant was seeking compensation in relation to a matter as to which it was in default. He submitted that the Council had exercised its powers under s.78 of the Act in relation to a matter, the admission of persons to the premises without them being reasonably safe, and the Claimant was in default in relation to that matter because it was in breach of the OLA and the HSWA.

Mr Gasztowicz QC submitted that the phrase “in default” in s.106 of the Act cannot be sensibly limited to a default under the Act or to a person who would be in breach of any obligation imposed by the Act. He said that, in any event, s.78 applies to a building or structure and requires the Council, if reasonably practicable, to give a notice to the owner and occupier of the building or the premises on which the structure is situated. He submitted that this identifies the person who is in default and the fact that the Council can recover the cost only from the owner under s.78(3) does not affect that. He posed the question: if the occupier of the building is not in default, who could be in default?

In relation to the interpretation of the Act, he referred to the decision of the Supreme Court in Welwyn Hatfield Borough Council v Secretary of State for Communities and Local Government [2011] 2 AC 304 which concerned the ability to obtain a certificate of lawful use for a bam that had been occupied as a dwelling for more than the four year limit for enforcement action under s.170B(2) of the Town and Country Planning Act 1990.

Lord Mance JSC, giving the judgment with which other members of the Supreme Court agreed, set out certain principles of the construction of statutes from Halsbury’s Laws and in Bennion on Statutory Interpretation (5th Edition. 2008). Those principles were set out at [45] and [46] as follows:

Lord Mance JSC then said this in relation to those principles at [53]:

“53.

Since the ultimate question is whether it can have been the intention of the legislator that a person conducting himself like Mr Beesley can invoke the benefits of sections 17IB and 191(1), I do not consider that there can be any absolute principle that public policy can only bear on the legislator's intention in a context where there has been the commission of a crime. The principle described in the passages cited from Halsbury and Bennion is one of public policy. The principle is capable of extending more widely, subject to the caution that is always necessary in dealing with public policy. Some confirmation that the need for an actual crime is not absolute can also be found in another case, R v Registrar General Ex v Smith [1991] 2 QB 393, where the Court of Appeal held it sufficient to disentitle a prisoner from exercising his on its face absolute right to inspect his birth certificate that there was a current and justified apprehension of a significant risk that he might in the future use the information thereby obtained to commit a serious crime. ”

Mr Gasztowicz QC submitted that, in construing s.106 of the Act in this case, it cannot have been the intention of the legislator than a person conducting themselves as the Claimant did and who was in default could invoke the benefits of s.106. That, he submitted, would not serve the public interest. He said that it was not the intention of s.106 that a person who has control of unsafe premises which that person could remedy but, instead, chooses to admit the public, can claim compensation when the Council prevents the public being admitted. He submits that a person in the position of the Claimant should not be entitled to benefit from its own wrong.

Mr Townend submitted that whilst there are no direct authorities on the meaning of “in default” in the context of s.106, it must refer to a default by being in breach of an obligation imposed on a person under the Act. He submitted that the wide meaning of “default” adopted by Mr Gasztowicz QC, encompassing duties under the OLA and the HSWA, cannot have been intended. He said that default implied some breach of duty in the statutory context of the Act not a breach of some external duty.

He submitted that the term “in default” in s.106 can only be properly understood in the context of the terms of the Act in which that phrase is used and in the light of authorities on the meaning of the term “default” in statutes.

He referred to the decision of the Court of Appeal in Neath Rural District Council v Williams [1951] 1 KB 116 which concerned the powers of a local authority to serve an abatement notice under s.93 of the Public Health Act 1936 on any person by whose “act, default or sufferance” the nuisance arises or continues, requiring them to abate it. A natural watercourse on the defendant’s land became silted up by natural causes and caused flooding. The defendants did not remove the blockage and an abatement notice was served on them, with which they did not comply.

In considering whether the defendant was liable under s.93 of the 1936 Act, Lord Goddard CJ, with whom the other members of the Court of Appeal agreed, said this at 126:

“In my opinion what we have to consider is whether the obstruction in the present case was caused and was continued by the act or default of the defendants, and not whether it was caused and continued through their act, default, or sufferance.

I cannot construe the word "default" here in the way in which we have been asked to construe it by the rural district council. I do not think that in this case "default" could mean merely doing nothing, unless an obligation to do something were imposed by the Act. There was no act of the defendants which caused the obstruction either to arise or to continue. I can well understand that there might be a case where it might be said that a person who failed to do something which he ought to have done, such for instance, as failing to prevent obstructive matter from going into a river from his own premises, had caused an obstruction by his default. In the present case, on the facts found by the justices, there is nothing to show that the defendants did anything which caused this obstruction to arise or to continue; nor do I think that there is anything which can properly be called a default on their part, although there might have been facts which amounted to a sufferance; but that word, I repeat, does not occur in the particular proviso with which we are concerned. ”

Mr Townend submitted that this showed that where the statute required a “default”, there had to be a default in the obligations under the 1936 Act. Thus, “default” required breach of “an obligation to do something” imposed by the Act.

I consider that Mr Townend is correct in his submissions. The statute is concerned with giving compensation to a party, not “in default” when that party sustains damage by reason of the exercise by the relevant authority of any of their powers under the Act. If a party sustains damage because an authority exercises its powers under the Act then the natural meaning of an exception based on “default” would, in my judgment, be a “default” under the Act. This is supported by what was said in Neath Rural District Council v Williams and is consistent with other cases such as Hobbs v Winchester Corporation [1910] 2 KB 471 and Place v Rawtenstall Corporation [1916] 86 LJKB 90 where default has been considered.

If that is not so and if it were necessary to see whether a party was in breach of any provision of other statutes, as is submitted here, then the scope of enquiry would be large and would require investigation of further factual matters to determine whether there was a default in terms of those statutes. This enquiry would take place in circumstances where the party was not in default of any obligations under the Act. As the submissions of Mr Gasztowicz QC demonstrate, it would be necessary to investigate whether a party was in breach of a duty owed to visitors or employees or others not in employment.

However, the fact that a party may be in breach of a duty owed to third parties should not, in principle, prevent that party from obtaining compensation when that party sustains damage by reason of the exercise by the relevant authority of powers under the Act. Very often the acts of a party may give rise to compensation from one party whilst at the same time being in default as regards third parties. It is generally only default in relation to the party obliged to give compensation which would provide a defence. In my judgment it is that principle which applies here.

It is not suggested on behalf of the Council that the Claimant was in default of any of the provisions of the Act. Rather the Council relies on default under other statutes. Sections 77 and 78 of the Act deal with dangerous buildings. Both provisions are concerned with the condition or state of a building or structure. The person in default is the owner of the building or structure which is in a dangerous condition or state. In this case it is the Pier Structure which was in a dangerous condition and it was Ravenclaw who were the owners of the Pier structure and responsible for the condition of the Pier structure.

In the present case, the Council chose to use its powers under s.78 of the Act to prevent the Claimant from having access to its premises when the landlord, Ravenclaw, the owner of the relevant parts of the Pier failed to carry out work necessary to maintain those parts of the Pier structure which it owned. In such circumstances, it was Ravenclaw, as owner of the Pier structure, who were in default under the Act in relation to the Pier structure which provided support for the Claimant’s premises. It is to be noted that under s.78(3) it is the owner from whom the Council can recover expenses reasonably incurred by them under s.78.

Whilst, as Mr Gasztowicz QC correctly submitted, the Claimant could have carried out the work which was the responsibility of Ravenclaw when Ravenclaw was in breach of their repairing covenant to the Claimant, the Claimant is under no obligation to carry out that work of repair as an alternative to suing the landlord for damages: see Granada Theatres Ltd v Freehold Investment Leytonstone Ltd [1959] 1 Ch 592 at paras (4) and (5) on p.608. The fact that the Claimant did not carry out the repairs and sue Ravenclaw does not make the Claimant a party “in default” under the Act and the Council did not contend that it did. Those actions are merely options for the Claimant when Ravenclaw is in breach of its obligations to repair the Pier structure.

I do not accept the submission by Mr Gasztowicz QC that it cannot have been the intention of the legislator that a person in default of OLA or HSWA could invoke the benefits of s. 106. In my judgment, the intention of the legislator cannot have been to consider default under other statutes or obligations. Section 106 is a provision which gives compensation for the exercise of powers by a local authority and the intention of the legislator would have been to prevent a party from recovering when that party was in default under that Act in relation to the matter giving rise to the exercise of those powers. I do not consider that the Claimant would be benefiting from its own wrong unless, in this case, it was obtaining compensation from the Council’s exercise of its powers in relation to the dangerous Pier structure which it owned and had an obligation to repair the Pier and remove the danger. As set out above it is Ravenclaw not the Claimant who is in that position.

In those circumstances, I consider that the Claimant is entitled to a declaration that: